Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Monday, April 22, 2019

Disclosure Incentives When Competing Firms Have Common Ownership

Jihwon Park, Harvard Business School, Jalal Sani, Penn State University, Nemit Shroff, Massachusetts Institute of Technology (MIT) - Sloan School of Management, and Hal D. White, Penn State University discuss Disclosure Incentives When Competing Firms Have Common Ownership.

Abstract: This paper examines whether common ownership – i.e., instances where investors simultaneously own significant stakes in competing firms – affects voluntary disclosure. We argue that common ownership (i) reduces proprietary cost concerns of disclosure, and (ii) incentivizes firms to “internalize” the externality benefits of their disclosure for co-owned peer firms. Accordingly, we find a positive relation between common ownership and disclosure. Evidence from cross-sectional tests and a quasi-natural experiment based on financial institution mergers help mitigate concerns that our results are explained by an omitted variable bias or reverse causality. Finally, we find that common ownership is associated with increased market liquidity.

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